Policy paper

Mutual recognition of goods: location of production

Updated 17 November 2020

What are we going to do?

We are ensuring that products which comply with relevant requirements at the location of their production can be sold throughout the UK^{[footnote 1]}. This is to ensure that local producers are subject to their local requirements.

How are we going to do it?

The Internal Market Bill sets out that the mutual recognition principle for goods applies to those goods which are produced in (or imported into) one part of the United Kingdom and can be sold in that part. That is to say that they do not contravene regulations that would apply to their sale.

The Internal Market Bill defines ‘produced in’ at Clause 15(3) as the place where the most recent significant production step which is a regulated step has occurred. This means 2 elements need to be considered.

The first is that the production step must be significant. Such a step is one which is significant in terms of the character of the goods or their purpose. For example, the baking of a loaf of bread would constitute a significant step.

Steps which are not significant include:

• preserving activities, such as cooling or freezing, high temperature treatment, drying, sealing, adding preservatives and similar measures unless significant to the character of the goods (for example pickling)
• presentational activities, such as cleaning, pressing, sorting by colour, display for sale
• activities to do with communication with regulators or other authorities, such as registration or notifications related to the goods or their production
• testing and assessing activities, such as pharmaceutical batch testing, taking samples from goods or similar quality assurance activities
• packaging, labelling, stamping or marking of goods is only significant if it is fundamental to the character of the goods or their purpose. For example jam made in Scotland but where the jar is labelled in England would be Scottish but collectable trading cards where the card stock is made in Scotland but the information on the cards is applied in England would be English because the information is fundamental to those goods

Secondly, the step must be a regulated one. A step is regulated if it would be subject to regulation in the part of the UK where it is being produced. Alternatively, it is a step which means that goods could not be sold in that part of the UK as they would contravene regulation in that part. For example, the manufacture of a crane in Scotland would constitute a regulated step. However, if another company in England purchased the crane and changed its colour before sale, the crane would still count as being produced in Scotland, as changing the colour is not a regulated step. In practice there will likely be significant overlap between non-significant and non-regulated steps, although there will certainly be steps classed as non-significant which are regulated (for example, the information that appears on a label is often subject to regulations).

It is worth noting that the above applies only to goods made in the UK. For imported goods, mutual recognition will apply if the good complies with the requirements of the part of the UK where it first arrives. This is not the same as importation in the trade and customs sense.

Goods which are produced in the UK or imported to a part of the UK and subsequently exported and re-imported are still considered as being produced in or imported into the original part. So, for example, biscuits which are made in Northern Ireland and transported to Wales via the Republic of Ireland are considered to be produced in Northern Ireland and not imported into Wales. Therefore, they will benefit from mutual recognition if they comply with the requirements of Northern Ireland. They do not need to comply with the requirements in Wales to be sold there (or in other parts of the UK).

Once the location of production (or import) is determined, in order for a good to benefit from mutual recognition, it will be necessary to ensure that it does not break any rules relating to its sale in that part. It does not need to actually be sold in that part but simply to comply with the rules which would apply were it to be sold there.

A product which is produced in one part of the UK but does not comply with the rules there can still be sold in another part of the UK if it does not contravene the relevant regulations of that other part^{[footnote 2]}. However, it would not then be able to benefit from the mutual recognition principle.

Background

We have drawn from the mutual recognition approach used successfully in Australia. The Australian version of mutual recognition specifies that in order to benefit from MR, a good must be permitted to be lawfully sold in the territory which it was ‘produced in or imported into’.

This can be contrasted with the EU system where the qualification for mutual recognition is related to placing on the market. The effect of this is that a producer in one jurisdiction can place on the market in another and thereby avoid the regulatory requirements which apply in their ‘home’ nation. Within the UK, this would mean that devolved administrations and the UK government acting for England would have limited autonomy in regulating in their own jurisdictions as producers could simply ‘place on the market’ elsewhere and essentially have a free choice of which regulation to follow.

Will additional labelling be required?

Additional labelling is not necessary to ensure compliance and regulations can be enforced correctly without the need for new labelling. In order to avoid placing additional burdens on traders, the Bill is not going to require traders to use particular methods to demonstrate that their goods benefit from the mutual recognition principle (for example the Bill will not require traders to comply with new labelling requirements).

We will provide guidance on the enforcement of the mutual recognition principle to businesses and regulators in due course. The guidance will indicate the types of evidence a trader may wish to use to demonstrate their goods benefits from the principle. The intention is for traders to be able to make use of existing documentation as far as possible.

How will mutual recognition impact on goods imported from elsewhere in the world?

The mutual recognition principle will mean that imported goods will have to meet the requirements of the part of the UK they are imported into. Where devolved administrations have the power, they will be able to determine the requirements for goods imported into (and produced in) their territory.

Importantly, the mutual recognition principle also means that once a good has met the rules of the part of the UK it was imported into (or produced in), it can be sold in other parts of the UK. This provides for a coherent UK internal market and will make the UK a more attractive trade partner.

A good is considered as imported when the ship that carried it reaches limits of the port where it is discharged, when it is unloaded from the plane that carried it, or when it enters the United Kingdom by land.

1. Subject to modifications in connection with the Northern Ireland Protocol. ↩

2. Assuming that it is lawful to produce a good which does not comply with rules on sale. For example, raw cow’s drinking milk (RCDM) cannot be sold in Scotland. However, it is currently lawful for a Scottish producer of RCDM to make that good in Scotland if it is destined for a market outside Scotland. ↩